IAMGOLD To Continue Upward Mobility In The Markets?

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As a confirming sign of a potential recovery in the precious metals complex, IAMGOLD Corp. (USA) (NYSE:IAG) reported solid operating results for the first quarter of 2015, according to a public announcement transmitted via PR Newswire. Among the highlights include gold sales of 208,000 troy ounces and net cash from operating activities in the amount of $30 million.

Steve Letwin, IAMGOLD’s president and chief executive officer, expounded further, stating, “Last year we said we would continue to focus on cost containment, capital discipline and cash preservation. In the first quarter we delivered on that plan, performing well across key metrics. Production was up 21% year-over-year, all-in sustaining costs were down 7%, capital spending was down 43%, net cash from operating activities was up 7%, and we ended the quarter with nearly $900 million in cash and bullion.”

Although the market responded positively to recent developments, will the long-term trajectory be equally as bullish? Technically speaking, the major challenge for IAG stock lies in its ability to beat a long-term downtrend that has been in place since 2009. Although IAG has the potential to rise to $5 per share as an example, this explosive move would still lie beneath the upper ceiling resistance of the down channel.

Statistically, the outlook is more definitively optimistic. Given IAG stock’s average performance over the last five weeks, — a result of 1.54% — there is a 57% probability that shares will appreciate in value within the next month. Essentially, there is a better than random chance that an investment today in IAG will result in profitability.

However, the risk-reward balance presents a variable dilemma. Average returns based on current market conditions is 8.48%, a fairly handsome reward given the short timeframe of five weeks. However, average losses amount to -9.62%, meaning that the magnitude of risk outweighs the magnitude of reward. Although the probability of IAG moving higher favors the bulls, the degree of volatility favors the bears.

This cat-and-mouse game is unfortunately symbolic of the entire precious metals sector. The recent performance of IAG and several other mining companies lends credence to the belief that the sector is due for a recovery. On the other hand, the bears have significant leverage in the market and have shown little mercy in driving sector valuations lower.

Ultimately, IAMGOLD should prove to be a long-term opportunity at its current price; however, there’s still some choppy waters ahead that will almost surely make this an uncomfortable ride.